Markets Insights

Investors keep eye on key economic data

US consumer prices and Fed minutes, Japan GDP figures and S'pore data may provide direction

Slated to be released this week are Singapore's data for June retail sales and numbers for July non-oil domestic exports.
Slated to be released this week are Singapore's data for June retail sales and numbers for July non-oil domestic exports.ST PHOTO: LIM YAOHUI

Investors will likely be kept busy in the week ahead with a number of key economic data slated to be released, said market analysts.

One key event will be the United States Federal Reserve's minutes of the July Federal Open Market Committee (FOMC) meeting, to be released early Thursday morning.

Any hint of an interest rate hike will be particularly watched, especially since the Fed recently noted that near-term risks - particularly those related to the fallout from Britain's vote to leave the European Union - have diminished.

"What investors will look out for is language reinforcing the view that the FOMC is predisposed towards a rate hike if economic data outperform in the months ahead," said IG market strategist Bernard Aw. "In that regard, US consumer prices and housing data will be watched closely."

Mr Aw noted that the latest non-farm payrolls, which came in stronger than expected, have raised market expectations that further rate hikes are still on the cards.

Closer to home, Japan is set to announce its second-quarter gross domestic product figures today, which are expected to show further signs of a slowdown.

Singapore is also releasing data for June retail sales today and its numbers for July non-oil domestic exports on Wednesday.

The Government last week narrowed its growth forecast for the year in view of the weaker global outlook and concerns over Brexit: Over the past few weeks, attention on the local front was largely focused on corporate earnings.

DBS Group Holdings, the last of Singapore's banks to announce results, posted a 6 per cent drop in second-quarter earnings to $1.05 billion last Monday.

Singapore's economy is now expected to grow by 1 to 2 per cent, from 1 to 3 per cent.

The Straits Times Index (STI) slipped 2.42 points, or 0.08 per cent, to 2,867.4 in a quiet session last Friday. But it was still 39.23 points or 1.39 per cent up for the shortened week, lifted in part by a strong showing in Wall Street.

All the three major US stock indexes - the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite Index - hit record highs on Thursday, although the former two pared their positions the following day.

"It's got to a level which I would call overvalued... and maybe I can't call it a bubble yet but we're pretty close in my view," Mr Hugh Johnson, chief investment officer of Hugh Johnson Advisors in New York, told Bloomberg.

A jump in bad debt for its clients in the oil and gas services sector, in particular debt-ridden Swiber Holdings, dragged earnings down.

A Fitch Ratings report noted that the local banks' second-quarter results showed pressure on profitability and asset quality, but their credit profiles "should remain resilient despite the weaker operating environment".

While few big earnings reports are due this week, Vallianz Holdings - 25.15 per cent owned by beleaguered Swiber - yesterday announced a 5.4 per cent slide in attributable net profit to US$3.57 million (S$4.8 million) for the second quarter. The firm took a one-off impairment charge of US$1.62 million that was related to the "intangible assets" of OER Group, a wholly-owned unit, arising from the latter's relationship with Swiber.

Ms Margaret Yang, market analyst at CMC Markets Singapore, believes the STI could remain range-bound in the coming week, with any potential "upside capped by lacklustre earnings and downside cushioned by cheap valuations". "Heightened financial and political risks from overseas markets, such as post-Brexit uncertainties and the Italian banking crisis, could also introduce new waves of panic to the local market," said Ms Yang.

A version of this article appeared in the print edition of The Straits Times on August 15, 2016, with the headline 'Investors keep eye on key economic data'. Print Edition | Subscribe